Telecom Stock Roundup: Intelsat Stock Dips, Vodafone's Cloud Foray, Other Updates

Telecom stocks’ downtrend continued over the past five trading days, as negotiations between high-level officials of the United States and China failed to come up with a consensus agreement on the various stumbling blocks. Investors appear jittery as speculations about the “Phase One” deal being signed off has gained steam, with President Trump threatening to further raise tariffs in a worst-case scenario.

The partial trade accord is widely anticipated to ease the bilateral tensions created by the prolonged trade war. However, the communist nation’s demands to roll back the existing U.S. tariffs cast doubts over a probable signing of an agreement between President Trump and his Chinese counterpart. In addition, various roadblocks related to forced technology transfer and IP protection, along with the lack of clarity on the quantum of U.S. farm products purchase by China on a monthly or yearly basis clouded the negotiation process. While both sides remain intent to reach an agreement at the earliest on domestic compulsions, it appears that the trade war has been rather a ‘two-steps forward, three-steps backward’ affair. This, in turn, has largely dragged the sector down.

Meanwhile, the U.S. administration has extended the deadline for a sweeping ban on trade with Chinese telecom equipment manufacturer Huawei by another 90 days, allowing domestic firms and rural carriers to utilize the window to purchase replacement parts and software. This marks the third such instance when the reprieve was extended since the U.S. Commerce Department added Huawei to the ‘Entity List’ in May, citing national security concerns. At the same time, the government reportedly approved a quarter of nearly 300 license applications by U.S. firms to trade with the beleaguered telecom firm. Although the names of the recipients of trade licenses have been kept under wraps, it is told that only those applications were approved that posed no significant risks to national security.

Company-specific news, government actions, technology collaborations, network modernization and product development have primarily taken the center stage over the past five trading days.

Recap of the Week’s Most Important Stories

1. Intelsat S.A.’s (NYSE:I) shares declined sharply as the Federal Communications Commission (“FCC”) lent support for the purported move by the Congress to hold public auction for its C-band spectrum. The stock tanked 56.6% in the first two days of the week beginning Nov 18, as investors resorted to panic selling.

Intelsat, along with some other satellite providers, had decided to sell some of the airwaves in the 3.7 gigahertz-to-4.2 gigahertz area of spectrum — widely known as the C-band — in a private auction to raise cash and repay debt. However, several U.S. senators introduced a bill titled the ‘5G Spectrum Act’ that mandated the public auctioning of the C-band to start no later than year-end 2020, and sharing at least half of the proceeds with the FCC. With the FCC Chairman Ajit Pai publicly supporting this view, shares went on a tailspin as the companies were set to lose a significant chunk of legitimate money. (Read more: Zacks Investment Research

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Written By: Zacks Investment Research